Firm taxability
This query is : Resolved
02 January 2016
I have an accountant in my business(partnership firm).He audit accounts from CA________.And net profit shown in P/l a/c(Audited) is ₹130000. And income tax return has shown total income of ₹200000.How?
No remuneration is given to any partner.
Interest is given at 10% on capital
Then how income increased by 70000
No remuneration is given to any partner.
Interest is given at 10% on capital
Then how income increased by 70000
03 January 2016
Without knowing the full details it is difficult to reply. Better you refer the computation of total income and get clarification from the accountant.
.
.
03 January 2016
No long term capital gain and no short term capital gain.
24 July 2024
The situation you've described suggests there's a discrepancy between the audited net profit shown in the Profit and Loss account (₹130,000) and the total income reported in the income tax return (₹200,000). Here are a few possible reasons why this difference might occur:
1. **Treatment of Expenses:**
- The audited profit in the Profit and Loss account (P/L A/c) might reflect expenses that are not deductible for income tax purposes. For example, certain non-business expenses or expenses that are not allowable under tax laws might reduce taxable income.
2. **Tax Deductions and Allowances:**
- Income tax returns typically allow for certain deductions, exemptions, or allowances that are not reflected in the audited profit. These could include deductions for depreciation, specific business expenses, or allowances for capital expenditures.
3. **Tax Treatment of Interest on Capital:**
- The interest paid at 10% on capital might be treated differently for accounting purposes versus income tax purposes. It's possible that the interest expense is fully deductible for income tax purposes, reducing taxable income further.
4. **Tax Credits or Rebates:**
- Depending on the tax jurisdiction and specific circumstances, there could be tax credits, rebates, or incentives that reduce the taxable income reported in the income tax return.
5. **Adjustments and Provisions:**
- There might be adjustments made during the preparation of the income tax return that differ from the audited financial statements. These adjustments could include provisions for future liabilities, adjustments for timing differences in recognizing income or expenses, etc.
To understand the exact reason for the ₹70,000 increase in total income reported in the income tax return compared to the audited net profit, it would be essential to review the detailed calculations and adjustments made during the preparation of the income tax return. Your accountant, who prepared the income tax return, should be able to provide a breakdown of how the taxable income was determined and what adjustments were made from the audited profit figure. This would clarify why there is a difference of ₹70,000 between the audited profit and the total income reported in the income tax return.
1. **Treatment of Expenses:**
- The audited profit in the Profit and Loss account (P/L A/c) might reflect expenses that are not deductible for income tax purposes. For example, certain non-business expenses or expenses that are not allowable under tax laws might reduce taxable income.
2. **Tax Deductions and Allowances:**
- Income tax returns typically allow for certain deductions, exemptions, or allowances that are not reflected in the audited profit. These could include deductions for depreciation, specific business expenses, or allowances for capital expenditures.
3. **Tax Treatment of Interest on Capital:**
- The interest paid at 10% on capital might be treated differently for accounting purposes versus income tax purposes. It's possible that the interest expense is fully deductible for income tax purposes, reducing taxable income further.
4. **Tax Credits or Rebates:**
- Depending on the tax jurisdiction and specific circumstances, there could be tax credits, rebates, or incentives that reduce the taxable income reported in the income tax return.
5. **Adjustments and Provisions:**
- There might be adjustments made during the preparation of the income tax return that differ from the audited financial statements. These adjustments could include provisions for future liabilities, adjustments for timing differences in recognizing income or expenses, etc.
To understand the exact reason for the ₹70,000 increase in total income reported in the income tax return compared to the audited net profit, it would be essential to review the detailed calculations and adjustments made during the preparation of the income tax return. Your accountant, who prepared the income tax return, should be able to provide a breakdown of how the taxable income was determined and what adjustments were made from the audited profit figure. This would clarify why there is a difference of ₹70,000 between the audited profit and the total income reported in the income tax return.
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